Executives and analysts alike say the LSE is officially "in play" after it revealed last week it was in talks about an all-share "merger of equals" with Deutsche Börse. On Tuesday ICE indicated it too may make a bid. "The LSE is a pretty hot target and is a massive foothold in European financial markets. Now the LSE is in play you can't afford not to be a bidder," said Niki Beattie, head of Market Structure Partners, a consultancy.
From the outset the 16-year old ICE has looked to the UK capital to help give its business scale, purchasing assets such as the International Petroleum Exchange and Liffe, whose names have disappeared under the ICE brand.
However, Atlanta-based ICE faces political and regulatory hurdles and may have to make a hefty offer if it is to walk off with London's biggest exchange asset.
Analysts said that the rationale for a bid is much the same as the one that drives the Deutsche Börse deal. Global regulations have forced banks to place billions of dollars of collateral and margin as insurance to back their derivatives trades. As a result, billions of dollars of capital are being held at clearing houses such as Deutsche Börse's Eurex, ICE Futures Europe and LCH. Clearnet. Bringing the clearing houses under one roof would allow customers to net their margin for swaps and futures.
Ms Beattie, a former bank head of electronic trading, thinks a deal for the LSE will happen after years of unconsummated bids. "I think that's why the banks won't lobby against it this time — the cost savings [from netting margins] will be too great for banks exhausted by regulatory issues."